President Bush signed the Milk Equity Act, which we have detailed here in the past. The provisions go into effect May 1 and last week USDA Secretary Mike Johanns announced an updated strategy for implementation of a national animal identification system.

National Milk’s Chris Galen called the announcement “progress but it’s only one step in the right direction and we’re going to need a whole lot more steps in the coming months and years.”

He charged that the USDA is still not planning to have a mandatory national program in place for another three years and National Milk believes that’s too long to wait in view of the challenges facing us like the prospect of avian influenza and other animal diseases.

The department is under pressure, according to Galen, because it doesn’t have adequate funding to do the job required. There’s also pressure from some animal and livestock groups who may oppose a mandatory government system, but National Milk views this as “part and parcel of doing business,” Galen said. “A lot of our cattle are already registered so we don’t think this is a big deal.”

He added that one of the challenges is that the process is voluntary. There’s not an urgency among producers to do anything, he said, and right now only about a quarter of livestock premises are registered, something NMPF has tried to help with through its I-Dairy project where a farmer can go to his state and register. Only a few states like Wisconsin require this, he said, and unfortunately only about a quarter of all dairy operations are registered in the country.

The Secretary needs to sit down with Congress, Galen said, and this may happen as part of the farm bill process, but he needs to be made aware of the urgency of this program.

Three years ago, when the first domestic case of Mad Cow disease was discovered in Washington State, then Secretary Ann Veneman said we would have an animal ID system within a year or two, Galen said.

“Here we are, almost three years later and we still struggling to get further down the road. We need to view this as an urgent issue more than it’s being treated as right now,” he added.

The USDA, in its latest World Agricultural Supply and Demand Estimates report, raised its 2006 milk production estimate to 182.2 billion pounds, up 200 million from last month’s report. 2005 production was estimated at 177 billion pounds. Product price forecasts were lowered from last month’s report.

The Class III milk price forecast was reduced due to lower than expected cheese prices. Economists now project a range of $11.45-$11.95 per cwt., compares to a $14.05 average in 2005.

Lower projected butter prices resulted in a lower forecast Class IV price. It is now projected at $10.65-$11.25, the 2005 average was $12.87. The all milk price is expected to range $12.55-$13.05, compares to a $15.15 average in 2005.

Downes-O’Neill dairy economist, Bill Brooks said that the cash butter and cheese markets are “trading sideways” and are “range bound” at $1.15-$1.20, although he warned that the butter price slipping three-quarters of a cent Monday prompted concern that “We might break through that support line.”

That hasn’t happened for some time, he said, and he predicted that prices will likely trade in a fairly narrow range until mid to the end of May.

Brooks concurs with the USDA’s increased projection on 2006 milk production although he warned that their estimate may not be high enough given the weather and the large number of animals on U.S. farms that are coming into the milking string. He suggests that estimate will continue to be raised.

When asked about dairy product demand, Brooks reported that use numbers were unchanged in the WASDE but “We are looking at good growth for this year but it’s not quite strong enough to offset what’s out there on our farms right now.”

Given the economic numbers and the latest employment report Brooks added that we could see a little bit stronger than average demand, stronger than what the USDA is looking for, and “That could help us get off these bottom prices and start moving higher a little sooner than maybe what most of us are anticipating.”

Cash dairy prices saw little change in the shortened holiday week. The markets were closed on Good Friday. Block cheese closed Thursday at $1.16 per pound, unchanged on the week, but 40 cents below a year ago. Barrel closed at $1.1225, down a half-cent on the week, and 35.75 cents below a year ago. No cheese traded on the spot market all week. The NASS U.S. average block price slipped to $1.1649, down 0.1 cent. Barrel averaged $1.1391, up 0.3 cent.

Butter closed at $1.1475, down a penny on the week, and 33.75 cents below a year ago. Three cars were sold. NASS butter averaged $1.1442, down slightly.

Market analyst Jerry Dryer provided DairyLine listeners with the latest information on dairy product commercial disappearance and retail sales data. He warned that it was “a little schizophrenic but positive. Retail is kind of mediocre.”

Retail data for the 52 weeks ending Feb. 26, shows natural cheese sales up 1.4 percent from a year ago in grocery stores, Dryer reported, and that data includes Wal-Mart sales. Process cheese sales however were down 3.3 percent. Total cheese sales were down a half percent. The process cheese business has simply been on a “slippery slope, on the retail side for quite some time,” he said.

Commercial disappearance data is very encouraging, according to Dryer. Fourth quarter 2005 was a problem, he said, but a nice recovery took place in January. He bases his opinions on commercial disappearance data for the most recent three months so, looking at November, December, and January, Dryer reported that disappearance of all milk and dairy products was up 2.7 percent and that’s on top of a 2.7 percent gain in that same time period a year ago.

“We aren’t moving additional cheese through retail but we are through the food service and ingredient channel,” he said, and he predicts that will remain strong.

When asked if we have seen the bottom on cheese prices, Dryer answered, “No, because we haven’t seen the peak on milk production yet.” Production continues to build, he said, and “I don’t think we can sell our way out of that.”

California’s May Class I milk price was announced at $12.33 per cwt. for the North, $4.05 below May 2005. The Southern price is $12.61, $4.04 below a year ago. The Federal order Class I base price is announced April 21.

The CWT program accepted four bids this week from California Dairies of Artesia to export 220,000 pounds of butter to Russia, 165,000 pounds to Kuwait, and 440,000 pounds to Turkey, plus 190,300 pounds of anhydrous milk fat to Mexico. A bid was also accepted from Seattle-based WestFarm Foods on 550,000 pounds of butter to Europe and Jordan.

A bid was accepted from Tempe-based United Dairymen of Arizona on 44,000 pounds of butter to Mexico as well as a bid from Humboldt Creamery of Fortuna, California on 237,600 pounds of whole milk powder to Guatemala.

Two bids were accepted from Dairy Farmers of America on 30,800 pounds of Mozzarella to Israel and 42,240 pounds of Monterey Jack to Japan. Three bids were accepted from Select Milk Producers, Inc. of Artesia, New Mexico to export 39,915 pounds of Cheddar, 40,700 pounds of Mozzarella, and 39,915 pounds of Monterey Jack to Mexico.

This farm news was published in the April 19, 2006 issue of Farm World.